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3 Big Downgrades

Morningstar recently cut the Analyst Ratings of these large funds.

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Susan Dziubinski: Hi, I'm Susan Dziubinski for Morningstar's fund research team downgrades their ratings on funds for a variety of different reasons. Sometimes, a significant manager or strategy change can lead us to re-evaluate a fund. Other times, costs are no longer competitive, and still other times, funds lose their competitive edge. Today, we're looking at three sizable funds that have recently been downgraded.

Greg Carlson: The Morningstar Analyst Rating of Fidelity Balanced was downgraded from Bronze to Neutral. That downgrade was driven by the downgraded fund's People rating from Above Average to Average. The downgrade there stems from our concerns about the team running the fund's equity portfolio that is divided into sector-specific sleeves. That team has seen a lot of turnover among the managers running those sleeves, and that detracts from our confidence in the fund's ability to add alpha versus its benchmark going forward. We do think the fixed-income team that runs part of this portfolio is strong, but it has typically run about a third of the fund's assets. The fund's neutral allocation is 60% stocks, 40% bonds. However, the fund has often been overweight equities versus that allocation, due to calls by the lead manager Bob Stansky.

Susan Dziubinski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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